Borough council loses appeal over compensation for pier closure

A local authority faces paying out a considerable sum in compensation and legal costs after this week losing an appeal against a decision that it was liable to compensate the operators of a business on a seaside pier.

Responding to the ruling, which could see it liable to pay £2m plus legal costs, Hastings Borough Council said it was “bitterly disappointed” and that it was considering a further appeal. The authority also called on the Local Government Association to lobby for a change in the law.

The council temporarily closed the pier to the public from June to September 2006 in the exercise of its statutory powers amid concerns over health and safety.

The principle issue in Manolete Partners PLC v Hastings Borough Council (7 May 2014) was whether the operators of the business on the pier were “in default” within the meaning of s. 106(1) of the Building Act 1984.

The respondent in the Court of Appeal, Manolete, was the assignee of Stylus Sports, which had let two units on the pier (a bingo hall and an amusement arcade).

Before the temporary closure of the pier, Stylus had been concerned about its structural integrity. It commissioned a survey which it provided to the owner at the time, Ravenclaw, in order to persuade it to carry out its repairing obligations under the leases.

The report was subsequently handed to Hastings in January 2005 as Stylus sought to get the council to act.

The authority served a notice on Ravenclaw – which had done limited repairs that failed to resolve the problems – and commissioned its own report from an independent firm of structural engineers, Gifford, that identified a number of defects.

On 16 June 2006 the local authority gave notice to the pier tenants that it was exercising its powers under s. 78 of the 1984 Act.

Stylus obtained an order compelling Ravenclaw to carry out the necessary remedial works. When Ravenclaw failed to comply, it secured an order permitting it to carry them out. The pier was reopened but Stylus’ attempts to recoup the cost of the repairs from Ravenclaw – a Panamanian-registered company – proved unsuccessful.

Stylus then brought a claim for compensation under s. 106 against the council. When it went into liquidation, the liquidator assigned the claim to Manolete.

In April last year the High Court ruled that the council was liable to pay up as it had been Ravenclaw that was in default, not Stylus.

Mr Justice Ramsey held that even if Stylus had been in breach of its duties under the Occupiers Liability Act 1957 or the Health and Safety at Work Act 1974, that did not constitute default within the meaning of s. 106 of the 1984 Act.

The council appealed but the Court of Appeal has upheld the earlier judgment. The Court, with the judgment given by Lord Justice Jackson, determined the meaning of “default” in the compensation provision (section 106).

Lord Justice Jackson said: “The tenant had no responsibility for the structure of the pier and was not responsible for the defects which had developed.

“The proposition that the tenant would be in breach of the Occupiers’ Liability Act 1957 or the Heath and Safety at Work Act 1974 by admitting the public onto its business premises does not constitute a defence to the claim under section 106 of the 1984 Act. Likewise the council cannot rely upon those matters as the basis of a defence of ex turpi causa.”

A spokesman for Hastings said: “As the Appeal Court noted in their judgment, 'the true culprit, Ravenclaw, is outside the jurisdiction and effectively beyond the reach of any enforcement procedures. The court is faced with the familiar problem of deciding which of the surviving partners should bear the loss caused by the culprit.'

“The council believes it was absolutely right to close the pier when it did in June 2006. Ravenclaw had failed to carry out essential safety work, pieces of metal had fallen from the underside of the pier, and Ravenclaw failed to comply with the notice served on it by the council requiring it to undertake a survey of the pier structure.”

He added that a large event was due to take place in the pier ballroom just days after it received the Gifford report. “The council felt it had no alternative other than to use its emergency powers to close the pier, and did so on Friday 16th June 2006, the day before the disco was due to take place.”

The spokesman pointed to an order made by Hastings magistrates prohibiting public access to most of the pier in September 2006, “effectively ratifying the council’s decision", an order that was subsequently upheld on appeal.

He continued: “The council is therefore disappointed that it is now facing a compensation claim, and having to pay legal costs, when all it has ever sought to do was ensure that the pier was safe for members of the public.”

The spokesman also warned that the case could compromise safety in the future. “If councils believe they may be liable to compensation claims if they use their emergency powers, they may choose not to use them, but instead apply to magistrates courts for an order instead. That can take time, meaning that potentially unsafe structures may remain open to the public.”

Samuel Townend, a barrister at Keating Chambers who appeared for Manolete, said: “The Court of Appeal said that the tenant, Stylus, the assignor of the claim, acted responsibly at all times. It did its utmost to compel the landlord to carry out remedial works.    
 
"The Court said that if the council had wanted to avoid liability to pay compensation under section 106, it could have taken action sooner and avoided taking emergency action under section 78. The case stands as a salutary warning to local authorities when dealing with dangerous premises or structures to think carefully about the approach it takes – doing the minimum may well have costly consequences.”

Hastings secured a compulsory purchase order over the pier in 2012, to hand it over to a local charity so it could be rebuilt.